During a conversation with EFY’s Nitisha, Jatin Chudasama from Allnyx Technology, discussed India’s electronics industry’s progress toward an end-to-end ecosystem. He highlighted the need for government-corporate collaboration, addressing issues in the EMS sector’s structure and pricing, the shortage of skilled resources, and supply chain management difficulties.
Q. How is India’s electronics industry progressing towards an end-to-end ecosystem?
A. The Indian electronics industry is booming with segments like electronic components, semiconductors, PCB manufacturing, electronics manufacturing services, and OSAT companies for assembly and testing. Aligning these verticals is challenging, but the ecosystem is gradually building up. India is progressing despite initial teething problems compared to established models in China. The government and corporate companies work together, with dedicated teams and ministries addressing concerns and supporting growth. Semiconductor plants are being set up, and in a few years, India is expected to have a robust end-to-end ecosystem, benefiting significantly from these efforts.
Q. What challenges does the Indian EMS sector face, and how can they be overcome?
A. The EMS sector in India is currently unstructured, leading to inconsistent pricing and delivery influenced by geographical location. For instance, EMS companies in Bengaluru may charge differently compared to those in Gujarat or Delhi for the same services. Supply chain challenges plague low-volume EMS companies, facing issues with pricing and delivery, while customers wield more negotiation power due to the competitive market. The government’s PLI scheme affects the business volume for EMS providers, as OEMs and product manufacturers set up their own SMT lines, reducing their reliance on EMS companies. This shift decreases the available business for EMS providers, akin to cooking at home instead of dining out. The sector also struggles with a shortage of skilled resources. EMS companies now hire from diploma programmes and ITIs, but the competition for skilled workers remains fierce, driving up salaries and costs. Fluctuating raw material prices further complicate the market. To address these issues, EMS companies need to standardise pricing models similar to fixed rates in medical pathology. Forming associations to represent their challenges to the government and collaborating with electronic institutes can help create a more structured and competitive EMS sector in India.
Q. Could you provide more information on supply chain management and its challenges?
A. Supply chain and pricing are crucial for a company’s profit growth. Effective supply chain management requires adequate capital for vendor development and procurement, knowing where, how, and when to buy. While cost is a factor, the critical aspects are timing, sourcing, and quality. Pricing can be adjusted slightly in the final project cost, making it less challenging than product quality. Ensuring the correct, trusted product is difficult, so we work with tier-one or tier-two suppliers authorised by principal companies. A common challenge is the cost disparity in sourcing components. For example, a specific IC might cost `100 from one source but `500-`700 from an authorised supplier. Managing these differences requires skill and understanding. It is unethical to overcharge customers by sourcing cheaper, unauthorised components. Using low-cost, unauthorised parts can compromise the entire board, leading to rework and wastage. Thus, sourcing the right components from reliable suppliers at the right time is critical.
Q. How does your supply chain team manage end-of-life component information effectively?
A. In the EMS industry, effective supply chain management hinges on team experience and collaboration with principal manufacturing companies. It is not just about sourcing products but also understanding the future plans of semiconductor manufacturers. Knowing when specific ICs or components are nearing the end of their life cycle is vital for advising customers and aiding design teams. Strong relationships with major companies like Intel or Samsung are crucial, as these manufacturers often don’t interact directly with smaller clients. Our supply chain team’s direct connections with national heads at these companies allow us to address supply, pricing, and other challenges efficiently, ensuring early access to critical information for better decision-making.
Q. Why are some electronic products cheaper despite high market prices?
A. One reason is that some companies procure from unauthorised markets, raising concerns about the genuineness of the parts. These could be duplicate parts or generic components manufactured by local companies, which might meet the exact technical specifications but lack quality assurance, similar to branded vs assembled ACs. These parts could be repurposed from scrapped boards or manufactured by companies in China and other regions. A reliable product requires a strict approach to sourcing materials and selecting components. When the design, supply chain, and EMS companies work together within this ecosystem, they ensure the product’s reliability and quality.
Q. How can customers ensure that EMS companies are providing genuine products?
A. At Allnyx, we prioritise using genuine materials and delivering the right products, avoiding compromises even if lower costs are tempting. For instance, in conformal coating, a customer may specify a 90-micron thickness, but some providers might use only 60 microns to cut costs, which is hard to detect. To ensure transparency, we invite customers to perform quality checks before dispatching orders. We notify them when their batch is ready and request that they conduct their checks or provide clearance. Sometimes, they ask to inspect ten boards before approving the rest for dispatch, maintaining trust in our quality assurance.
Q. How do you manage the storage and shelf life of electronic components?
A. Every component comes with specific packaging and a batch code, along with a timeline for usage. If not used within this time, they must be stored in a controlled environment with regulated weather, humidity, and other elements. The OEM specifies the expiry date, and electronic products should be used within six months of procurement.
Q. How do government policies ensure fairness across different business sectors?
A. The government offers substantial benefits for expanding businesses, including incentives for plant and machinery investments, tax benefits, and subsidies. These policies apply to all types of companies, whether they are OEM manufacturers or EMS providers, ensuring fairness across different verticals. The government takes a balanced approach, making sure that no single industry receives disproportionate advantages. Policies are well-defined, and the government maintains a close watch on their implementation to ensure industries benefit from them. They regularly assess the impact of these policies on the economy. Participation in government initiatives, such as seminars, allows us to stay informed about updates and changes. The government is committed to adjusting schemes and extending benefits as needed to support industry growth and economic stability.
Q. What type of unified approach is needed for the EMS industry?
A. Different cities have distinct geographical hubs for EMS associations, but a unified platform is needed to address common issues with the government or competent authorities and within the EMS industry itself. Unlike the software industry, which has larger platforms, our presence isn’t as widespread across the country. A larger, more unified platform would enable us to perform more effectively and advocate for our needs more efficiently.
